World's poor look past aid

Foreign aid never rose with the boom, so a UN meeting puts hope in business.

Once upon a time, Jean-Pierre Ouedraogo had a dream. As economic boom times brought new prosperity to Americans and Europeans, he thought, they would share a little more of their wealth with the rest of the world.

Mr. Ouedraogo, his native Burkina Faso, and other developing nations have been sorely disappointed.

In fact, the world's richest countries have grown stingier. Over the past 10 years, they have been spending a smaller and smaller chunk of their money to help developing countries, and the effects are clear.

"It means schools that close, hospitals without medicines, roads that aren't maintained," says Ouedraogo, a social activist who was in Brussels last week for a United Nations conference studying ways to pull the world's least developed countries out of their poverty. "That makes development even harder. We have fallen into a trap."

It has been more than 30 years since the developed nations ofthe West promised to put 0.7 percent of their gross national product aside as aid to Third World countries. This year, the United States will manage only 0.11 percent, the lowest figure since World War II. Only a handful of European governments, notably in Scandinavia, have met the target.

"There is no doubt that 'donor fatigue' has set in," says Charles Gore, an economist with the UN Conference on Trade and Development (UNCTAD), the agency that sponsored the meeting that ended here yesterday. "Aid has a bad name ... and one cannot deny that aid has been very ineffective. But that doesn't mean that it doesn't matter."

Public-spending cutbacks across the developed world are partly to blame: As governments have sought ways to save, aid ministries have generally lost out to more politically powerful domestic issues, such as education, healthcare, or defense.

The end of the cold war has dimmed the aid picture too, now that Western governments feel less of a need to keep developing client states and allies in line. In many donor countries, UN Development Program (UNDP) chief Mark Malloch-Brown told the daily newspaper published for delegates to the Brussels conference, "Frankly, the allocation of aid followed geopolitical military strategic patterns. Once that is stripped away, development assistance looks a little naked."

At the same time, ordinary citizens in the wealthy countries - despairing of repeated failures - are losing patience. "They say they are tired of helping poor countries and not seeing results because there is a lot of corruption and fraud," says Ouedraogo. "That is true," he acknowledges. But if activist groups like his were more involved, he argues, "We could be vigilant and blow the whistle on fraud.... We are taking up the fight to restore confidence to public opinion" in aid-giving countries.

That is a notion that is gaining ground, as nongovernmental organizations play an ever-bigger role in planning and carrying out aid projects.

But even more hopes have been pinned on private investment in developing countries as a way of taking up the slack in official aid from donor governments or institutions such as the World Bank. "We diplomats and international bureaucrats can say what we like," said UNCTAD Secretary General Rubens Ricupero, explaining why he had invited businessmen for the first time to a conference on the least-developed countries. "But the people who make decisions on investment are the CEO's."

Foreign direct investment in the world's 49 poorest countries has shot up from $600 million to $5.2 billion over the past decade. That sort of money "can play a greater part than it currently does in the development process," an UNCTAD study suggests. But it is not enough on its own.

"A foreign investor wants to find ready skills ... good roads, good ports," explains Kweronda Ruhemba, Uganda's minister for economic monitoring. "The onus is on us to establish the schools and universities we need ... to invest in infrastructure. And we can achieve all this only if aid continues to flow in."

Developing countries have also been hammering on their rich partners to explore other ways of helping them besides aid. One way would be to lower trade barriers, since protectionism costs developing countries more each year than they receive in aid.

The European Union recently took a step in this direction, offering Third-World exporters a tariff-free market for everything but weapons sales. But it will only be phased in over eight years for key exports such as rice, sugar, and bananas.

The poorest countries got a smidgen of relief last week, when the Paris-based Organization for Economic Cooperation and Development (OECD), the "rich man's club" of Western industrial nations, recommended that donor countries stop insisting that recipients spend their aid money in the country that gave it.

"Untying" development aid would save recipient governments about 25 percent by allowing them to shop around internationally for the goods and services they need, the OECD estimates.

But the chances that OECD countries will significantly boost their aid in the near future, let alone reach the 0.7 percent of GNP target, seem slim at the moment. Against that political reality, argues Mr. Gore, "we have to set the economic reality" that if the world is to meet the goal set by last year's Millennium Summit at UN headquarters - to reduce the number of people living in abject poverty by half by 2015 - "there has got to be more aid."

(c) Copyright 2001. The Christian Science Monitor

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